As filed with the Securities and Exchange Commission on July 10, 1996
File No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DCC COMPACT CLASSICS, INC.
(Exact name of issuer as specified in its charter)
Colorado 84-1046186
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9301 Jordan Avenue
Suite 105
Chatsworth, California 91311
(Address of principal executive offices) (Zip Code)
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CONSULTING AND STOCK OPTION AGREEMENT WITH GARY GILLMAN
COMMON STOCK PURCHASE WARRANT WITH MARSHALL BLONSTEIN
(Full title of the plan)
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Marshall Blonstein
9301 Jordan Avenue, Suite 105
Chatsworth, California 91311
(Name and address of agent for service)
Copy to:
Jim Schneider, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
(305) 763-1200
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of securities Amount to be price per offering registration
to be registered registered(1) share(1) price(1) fee(2)
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Common Stock
($.005 par value)
10,000 shares $.10 $ 1,000 $ .34
200,000 shares $.13 $ 26,000 $ 8.97
200,000 shares $.13 $ 26,000 $ 8.97
--------
$ 53,000 $100.00
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(1) Pursuant to Rule 457(h), the maximum offering price was calculated based
upon the exercise price of the Options described herein.
(2) The registration fee represents the minimum prescribed fee.
ii
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DCC COMPACT CLASSICS, INC.
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K
Form S-8 Item Number
and Caption Caption in Prospectus
-------------------- ---------------------
1. Forepart of Registration State- Facing Page of Registration
ment and Outside Front Cover Statement and Cover Page of
Page of Prospectus Prospectus
2. Inside Front and Outside Back Inside Cover Page of Pro-
Cover Pages of Prospectus spectus and Outside Cover
Page of Prospectus
3. Summary Information, Risk Fac- Not Applicable
tors and Ratio of Earnings to
Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Sales by Selling Security
Holders
8. Plan of Distribution Cover Page of Prospectus
and Sales by Selling
Security Holders
9. Description of Securities to be Description of Securities;
Registered Consulting and Stock
Option Agreement with
Gary Gillman and Warrant
with Marshall Blonstein.
10. Interests of Named Experts and Not Applicable
Counsel
11. Material Changes Not Applicable
12. Incorporation of Certain Infor- Incorporation of Certain
mation by Reference Documents by Reference
13. Disclosure of Commission Posi- Indemnification; Undertak-
tion on Indemnification for ings
Securities Act Liabilities
iii
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PROSPECTUS
DCC COMPACT CLASSICS, INC.
410,000 Shares of Common Stock
($.005 par value)
Issued Pursuant to Exercise of
Options under the Company's
Consulting and Stock Option Agreement with Gary Gillman
and Warrants under the Company's Common Stock Purchase Warrant
with Marshall Blonstein
This Prospectus is part of a Registration Statement which registers an
aggregate 410,000 shares of Common Stock ("Common Stock"), $.005 par value (such
shares being referred to as the "Shares") of DCC Compact Classics, Inc. (the
"Company") which may be issued upon the exercise of certain options and
warrants, as set forth herein, to: (i) Gary Gillman, a consultant to and
director of the Company, pursuant to a written Consulting and Stock Option
Agreement dated March 8, 1996 (the "Gillman Option Agreement"), providing for
the issuance of options to purchase shares of Common Stock, 10,000 of which are
being registered hereby;and (ii) Marshall Blonstein, the CEO, President and a
director of the Company ("Blonstein"), pursuant to a written Common Stock
Purchase Warrant dated April 1, 1994, as amended (the "Blonstein Warrant"),
providing for the issuance of warrants to purchase shares of Common Stock,
200,000 of which are being registered hereby. Gillman and Blonstein in their
capacity as selling shareholders, may sometimes hereafter be collectively
referred to as the "Selling Security Holders." The Company has been advised by
the Selling Security Holders that each of them may sell all or a portion of the
Shares from time to time in the over-the-counter market in negotiated
transactions, directly or through brokers or otherwise, and that such shares
will be sold at market prices prevailing at the time of such sales or at
negotiated prices, and the Company will not receive any proceeds from such
sales.
No person has been authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus, and if given
or made, such information or representation must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor any
distribution of the shares of the Gillman Incentive Stock nor the Blonstein
Incentive Stock issuable pursuant to the terms of the Option Agreement or the
Blonstein Warrant, respectively, shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The date of this Prospectus is July 10, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Company's Common Stock is traded in the over-the-counter market on NASDAQ under
the symbol "DCCC."
The Company has filed with the Commission a Registration Statement on Form
S-8 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), with respect to the resale of up to an aggregate of 410,000 shares
of the Company's Common Stock, to be issued to a consultant and directors of the
Company upon exercise of certain options and warrants pursuant to the written
Gillman Option Agreement and the Blonstein Warrant. This Prospectus, which is
Part I of the Registration Statement, omits certain information contained in the
Registration Statement. For further information with respect to the Company and
the shares of the Common Stock offered by this Prospectus, reference is made to
the Registration Statement, including the exhibits thereto. Statements in this
Prospectus as to any document are not necessarily complete, and where any such
document is an exhibit to the Registration Statement or is incorporated by
reference herein, each such statement is qualified in all respects by the
provisions of such exhibit or other document, to which reference is hereby made,
for a full statement of the provisions thereof. A copy of the Registration
Statement, with exhibits, may be obtained from the Commission's office in
Washington, D.C. (at the above address) upon payment of the fees prescribed by
the rules and regulations of the Commission, or examined there without charge.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference and made a part hereof:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994.
2. The Company's Form 10-QSB Quarterly Report for the quarterly period
ended March 31, 1995.
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3. The Company's Form 10-QSB Quarterly Report for the quarterly period
ended June 30, 1995.
4. The Company's Form 10-QSB Quarterly Report for the quarterly period
ended September 30, 1995.
5. The Company's Form 10-KSB Annual Report for the year
ended December 31, 1995.
All reports and documents filed by the Company pursuant to Section 13, 14
or 15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, DCC Compact
Classics, Inc., 9301 Jordan Avenue, Suite 105, Chatsworth, California 91311,
Telephone (818) 993-8822.
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THE COMPANY
DCC Compact Classics, Inc. (the "Company") was incorporated as a Colorado
corporation on February 20, 1986, and on October 19, 1987, completed the
acquisition of Dunhill Compact Classics, Inc., a privately-held California
corporation. The focus of the Company's operations following such acquisition
was to establish a specialized niche in the then-emerging market for compact
discs ("CDs"). The emergence of compact disc technology in the early 1980's led
to segments of the consuming public replacing their collections of vinyl and
audio cassettes with the superior quality and convenience of compact discs.
Classical music listeners were the first segment to accept compact disc
technology and the initial discs made available were comprised of classical
albums. Since that time there has been substantial acceptance of compact discs
for all types of music, including classical, jazz, rock and oldies. Sales of
compact discs are growing rapidly and by the end of 1994 represented in excess
of 70% of all music sales in the $12 billion record industry.
A predominant portion of the Company's manufacturing process utilizes a
coating of 24K gold and a proprietary vintage vacuum tube system which are
considered by various audiophiles to have a superior phonic quality compared
with standard CDs, and thereby can be sold at a premium in excess of the
incremental manufacturing costs. The Company is presently one of the industry
leaders in the sale of 24K gold CDs and has license rights to the exclusive
exportation of 24K gold CDs albums by such artists as Frank Sinatra, Ray
Charles, Bob Dylan, The Doors, The Eagles, Paul McCartney, Cream, Miles Davis,
Creedence Clearwater Revival, Joni Mitchell, The Steve Miller Bank and Bob
Seger. The Company has successfully exploited the consumer demand for reissues
and compilations of music originally issued on vinyl and audio cassettes. This
has been achieved through the purchase, exploitation and sale of catalogs of
music masters and by licensing rights from others to music masters for
exploitation. The Company's basic concept has been to provide the listening
public a compact disc line that specializes in contemporary music which includes
jazz, classical and oldies and the 24K gold limited edition series. In addition,
the Company has developed "Collection" series which features the best of a
certain performance era or type of music.
Since formation of the Company in February 1986, the Company has entered
into licensing agreements with major record labels throughout the industry,
including Sony, MCA, Warner, Elektra, Atlantic, Arista, Capitol and Polygram
among others. Typically, licensing agreements range from three to five years in
term with possible renewal options. Royalties are paid to the licensor at
between $.55 to $6.00 per unit sold for the term of the agreement. The licensing
agreements grant the Company the exclusive or non-exclusive right to take master
4
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recordings of many top artists for the purpose of enhancing the sound quality
through digital sound recording process and then to market under the Company's
trade label the individual recordings or compilations in the form of a compact
disc. At the present time, most of the major music recording companies are not
seeking to develop this specialized niche on a proprietary basis and rely on
specialty operations such as the Company for the development of the reissue
market. The Company follows the normal practice for independent record labels,
which entails subcontracting manufacturing, field sales, physical distribution,
billing and collections to specialized entities providing the services.
Commencing in 1994, the Company formed a strategic alliance with Romance
Alive Audio, Inc. to enter into the emerging market for audio books with a focus
on romance novels. Romance Alive Audio operates out of the same facilities as
the Company, specializes in publishing romance novels on audio cassettes and
markets such audio cassettes through chain stores, supermarkets and traditional
book outlets. The Company has completed signings with numerous well-known
authors in this field and has the potential to become a recognized publisher of
women's romance novels on audio cassettes in the United States.
The Company's offices are located at 9301 Jordan Avenue, Suite 105,
Chatsworth, California 91311, the telephone number of the Company is (818)
993-8822.
CONSULTING AND STOCK OPTION AGREEMENT WITH GARY GILLMAN
On November 21, 1991, the Company entered into an oral Consulting and
Stock Option Agreement with Gary Gillman (reduced to writing on March 8, 1996)
to which the Company agreed to issue to the Consultant options (the "Options")
to purchase 25,000 Shares in consideration for certain financial, administrative
and accounting services to be provided to the Company on an as-needed basis. Mr.
Gillman has also served as a director of the Company since 1993. The Options are
exercisable at $.10 per share of Common Stock on or prior to November 20, 1996.
At this time the Company is registering 10,000 of the 25,000 shares of Common
Stock underlying the Options issued by the Company to Mr. Gillman.
COMMON STOCK PURCHASE WARRANT WITH MARSHALL BLONSTEIN
On April 15, 1994, the Company issued a Common Stock Purchase Warrant to
Marshall Blonstein, the President and Chief Executive Officer and a director of
the Company, a warrant to purchase up to 225,000 shares of Common Stock,
exercisable at any time on or before April 15, 1999. On May 24, 1995, the board
of directors of the Company modified the exercise price of the Warrants from
$.25 per Share to $.13 per Share. The Company is registering hereby 200,000 of
the 225,000 Shares underlying the Warrants issued by the Company to Mr.
Blonstein.
5
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Federal Income Tax Effects
An option or warrant holder does not recognize taxable income on the date
of the grant of the Options or Warrants, which is a non-statutory option and
warrant, but recognizes ordinary income generally at the date of exercise in the
amount of the difference between the Option or Warrant exercise price and the
fair market value of the Common Stock on the date of exercise. However, if the
holder is subject to the restrictions on resale of common stock under Section 16
of the Securities Exchange Act of 1934, such person generally recognizes
ordinary income at the end of the six-month period following the date of
exercise in the amount of the difference between the Option or Warrant exercise
price and the fair market value of the common stock at the end of the six-month
period. Nevertheless, such holder may elect, within 30 days after the date of
exercise, to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option or warrant holder is deductible by the
Company in the year that income is recognized.
Restrictions Under Securities Laws
The sale of any shares of Common Stock acquired upon the exercise of the
Options and Warrants must be made in compliance with federal and state
securities laws. Officers, directors and 10% or greater stockholders of the
Company, as well as certain other persons or parties who may be deemed to be
"affiliates" of the Company under the Federal Securities Laws, should be aware
that resales by affiliates can only be made pursuant to an effective
Registration Statement, Rule 144 or any other applicable exemption. Officers,
directors and 10% and greater stockholders are also subject to the "short swing"
profit rule of Section 16(b) of the Securities Exchange Act of 1934. Section
16(b) of the Exchange Act generally provides that if an officer, director or 10%
and greater stockholder sold any Common Stock of the Company acquired pursuant
to the exercise of a stock option or warrant, he would generally be required to
pay to the Company any "profits" resulting from the sale of the stock and
receipt of the stock option. Section 16(b) exempts all option exercises from
being treated as purchases and, instead, treats an option grant as a purchase of
the underlying security, which grant/purchase may be matched with any sale of
the underlying security within six months of the date of grant.
SALES BY SELLING SECURITY HOLDER
The following table sets forth the name of the Selling Security Holder,
the amount of shares of Common Stock held directly or indirectly, the maximum
amount of shares of Common Stock to be offered by the Selling Security Holder,
the amount of Common Stock to be owned by the Selling Security Holder following
the sale of such shares of Common Stock and the percentage of shares of Common
Stock to be owned by the Selling Security Holder following completion of such
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offering (based on 6,696,725 shares of Common Stock of the Company outstanding
at June 17, 1996).
Percentage
Shares to be to be Owned
Name of Selling Number of Shares to Owned After After
Security Holder Shares Owned be Offered Offering Offering
- --------------- ------------ ---------- -------- --------
Gary Gillman 25,000(1) 10,000 15,000 (2)%
Marshall Blonstein 2,936,440(4) 200,000 2,736,440 40.86%
- --------------------
(1) Includes options to purchase 25,000 shares of Common Stock at $.10 per
share.
(2) Less than 1%.
DESCRIPTION OF SECURITIES
Authorized Capital Stock
The Certificate of Incorporation of the Company authorizes the Company to
issue up to 10,000,000 shares of Common Stock, par value $.005 per share, of
which 6,696,725 shares were outstanding at June 17, 1996. No shares of Preferred
Stock are authorized by the Company's Certificate of Incorporation.
Common Stock
The Company's authorized Common Stock consists of 10,000,000 shares par
value $.005 per share, of which 6,696,725 shares were outstanding at June 17,
1996. Each holder of record of Common Stock is entitled to one vote for each
outstanding share of Common Stock owned by him on every matter properly
submitted to such stockholder for his vote. The Restated Certificate of
Incorporation of the Company does not authorize cumulative voting for the
election of directors.
The holders of Common Stock are entitled to such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, dissolution or winding up of the affairs of the
Company, such holders are entitled to receive ratably the net assets of the
Company available for distribution to holders of Common Stock. No holder of any
shares of Common Stock has any preemptive right to subscribe for any securities
of the Company.
Transfer Agent
The transfer agent for the Common Stock is Corporate Stock Transfer
Company, 370 17th Street, Suite 2350, Denver, Colorado 80202-4614.
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LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., 200 East Las Olas Boulevard, Suite
1900, Fort Lauderdale, Florida 33301.
EXPERTS
On April 22, 1996, Henson & Company, the Company's independent auditors,
chose not to continue as the Company's independent auditor based on its desire
to discontinue providing auditing services to publicly-traded companies. The
Company and Henson & Company did not have any disagreements during the two
fiscal years ending December 31, 1994 or any subsequent interim period with
respect to matters of accounting principles or practices, financial statement
disclosure or auditing scope, or procedure which, if not resolved to Henson &
Company's satisfaction, would have caused it to make reference to the subject
matter of such disagreement in its reports. In connection with the termination
of such relationship, the Company decided to engage Winter, Scheifley &
Associates, P.C., Certified Public Accountants, as the Company's accountants to
audit the Company's financial statements for the fiscal year ending December 31,
1995.
INDEMNIFICATION
Article XII of the Articles of Incorporation of the Company provides as
follows:
"The Corporation shall indemnify any and all of its directors,
officers, employees, authorized agents or former directors or
officers or any person who may have served at its request as a
director or officer of another corporation in which it owns shares of
capital stock or of which it is a creditor, against expenses actually
and necessarily incurred by them to the fullest extent permitted
under Colorado Corporate Code, in connection with the defense of any
action, suit or proceeding in which they or any of them, are made
parties, or a party, by reason of being or having been directors or
officers of the Corporation, or of such other corporation, except in
relation to matters to which any such director or officer or former
director or person shall be adjudged in such action, suit or
proceeding to be liable for gross negligence or willful misconduct in
the performance of duty. Such indemnification shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled, under any By-Law agreement, vote of shareholders or
otherwise.
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In addition, no officer, director, employee or authorized agent shall
be personally liable for any injury to person or property arising out
of a tort committed by an employee unless such officer or director
was personally involved in the situation giving rise to the
litigation or unless such officer or director committed a criminal
offense. The protection afforded hereby shall not restrict the
Corporation's right to eliminate or limit the personal liability of a
director to the Corporation or to its shareholders for monetary
damages for breach of fiduciary duty as a director, and the personal
liability of directors to the Corporation and to its shareholders for
monetary damages shall be eliminated or limited, to the full extent
permitted by the Colorado Corporation Code, except for monetary
damages for: any breach of the director's duty of loyalty to the
Corporation or to its shareholders; acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation
of law; acts specified in Section 7-5-114 of the Colorado Corporation
Code; or any transaction from which the director derived an improper
personal benefit. Nor shall the liability of a director of the
Corporation be eliminated or limited to the Corporation or to its
shareholders for monetary damages for any act or omission occurring
prior to the effective date of this Article."
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
- ------- ---------------------------------------
The documents listed in (a) through (f) below are incorporated by
reference in the Registration Statement. All documents subsequently filed by the
Registrant pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in the Registration Statement and to be part
thereof from the date of filing of such documents.
(a) The Registrant's latest annual report filed pursuant to Section
13(a) or 15(d) of the Exchange Act, or, in the case of the Registrant, either
(1) the latest prospectus filed pursuant to Rule 424(b) under the Securities Act
of 1933, as amended (the "Act"), that contains audited financial statements for
the Registrant's latest fiscal year for which such statements have been filed or
(3) the Registrant's effective Registration Statement on Form 10 or 30F filed
under the Exchange Act containing audited financial statements for the
Registrant's latest fiscal year.
(b) The Registrant's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1995.
(c) The Registrant's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1995.
(d) The Registrant's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1995.
(e) The Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1995.
(f) All other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year covered by the Registrant's
document referred to in (a) above.
(g) The description of the Common Stock of the Company which is
contained in a Registration Statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such description.
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Item 4. Description of Securities
- ------ -------------------------
A description of the Registrant's securities is set forth in the
Prospectus incorporated as a part of this Registration Statement.
Item 5. Interests of Named Experts and Counsel
- ------ --------------------------------------
Not Applicable.
Item 6. Indemnification of Directors and Officers
- ------ -----------------------------------------
Article XII of the Articles of Incorporation of the Company provides as
follows:
"The Corporation shall indemnify any and all of its directors,
officers, employees, authorized agents or former directors or
officers or any person who may have served at its request as a
director or officer of another corporation in which it owns shares of
capital stock or of which it is a creditor, against expenses actually
and necessarily incurred by them to the fullest extent permitted
under Colorado Corporate Code, in connection with the defense of any
action, suit or proceeding in which they or any of them, are made
parties, or a party, by reason of being or having been directors or
officers of the Corporation, or of such other corporation, except in
relation to matters to which any such director or officer or former
director or person shall be adjudged in such action, suit or
proceeding to be liable for gross negligence or willful misconduct in
the performance of duty. Such indemnification shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled, under any By-Law agreement, vote of shareholders or
otherwise.
In addition, no officer, director, employee or authorized agent shall
be personally liable for any injury to person or property arising out
of a tort committed by an employee unless such officer or director
was personally involved in the situation giving rise to the
litigation or unless such officer or director committed a criminal
offense. The protection afforded hereby shall not restrict the
Corporation's right to eliminate or limit the personal liability of a
director to the Corporation or to its shareholders for monetary
damages for breach of fiduciary duty as a director, and the personal
liability of directors to the Corporation and to its shareholders for
monetary damages shall be eliminated or limited, to the full extent
permitted by the Colorado Corporation Code, except for monetary
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damages for: any breach of the director's duty of loyalty to the
Corporation or to its shareholders; acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation
of law; acts specified in Section 7-5-114 of the Colorado Corporation
Code; or any transaction from which the director derived an improper
personal benefit. Nor shall the liability of a director of the
Corporation be eliminated or limited to the Corporation or to its
shareholders for monetary damages for any act or omission occurring
prior to the effective date of this Article."
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 7. Exemption from Registration Claimed
- ------ -----------------------------------
Inasmuch as the consultant that received the Incentive Stock of the
Registrant was knowledgeable, sophisticated and had access to comprehensive
information relevant to the Registrant, such transaction was undertaken in
reliance on the exemption from registration provided by Section 4(2) of the Act.
As a condition precedent to such grant, the Consultant was required to express
an investment intent and consent to the imprinting of a restrictive legend on
each stock certificate to be received from the Registrant except upon sale of
the underlying shares of Common Stock pursuant to a registration statement.
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Item 8. Exhibits
- ------ --------
Exhibit Description
- ------- -----------
(4.1) Consulting and Stock Option Agreement with Gary Gillman.
(4.2) Common Stock Purchase Warrant with Marshall Blonstein.
(4.3) Resolution dated May 24, 1995 modifying the exercise price of Common
Stock Purchase Warrants.
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating to the
issuance of shares of securities pursuant to the above Option Agreement
(23.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A. included in the
opinion filed as exhibit (5) hereto
(23.2.1) Consent of independent certified public accountants - Henson and
Company for the period ended December 31, 1994.
(23.2.2) Consent of independent certified public accountants - Scheifley &
Associates, P.C.
Item 9. Undertakings
- ------- ------------
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offerings or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(b) That, for the purposes of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
13
<PAGE>
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S- 8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chatsworth and the State of California, on the
10th day of July, 1996.
DCC COMPACT CLASSICS, INC.
By: /s/Marshall Blonstein
------------------------------
Marshall Blonstein
President and Principal
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President, Principal
Executive Officer,
Principal Financial
Officer and Director
and Principal Accounting
/s/ Marshall Blonstein Officer July 10, 1996
- --------------------------
Marshall Blonstein
/s/ Robert Siner Director July 10, 1996
- --------------------------
Robert Siner
/s/ Gary Gillman Director July 10, 1996
- --------------------------
Gary Gillman
Consulting and Stock Option Agreement with Gary Gillman
CONSULTING AND STOCK OPTION AGREEMENT
-------------------------------------
THIS CONSULTING AND STOCK OPTION AGREEMENT (the "Agreement") dated as of
the 8th day of March, 1996, but effective as of November 21, 1991 (the
"Effective/Grant Date") is made and entered into by and between DCC COMPACT
CLASSICS, INC., a Colorado corporation with its principal offices located at 903
Jordan Avenue, Suite 105, Chatsworth, California 91311 (the "Company") and Gary
Gillman, ("Gillman") whose address is 6345 Balboa Boulevard, Suite 145, Encino,
California 91316.
W I T N E S S E T H:
WHEREAS, Gillman is knowledgeable in all material aspects of accounting
and particularly in the accounting practices of the Company; and
WHEREAS, from time to Gillman will provide certain accounting and
financial services to the Company, on an as needed basis; and
WHEREAS, in consideration for the services to be provided by Gillman to
the Company, Gillman shall be granted the option for certain shares of common
stock, par value $.005 per share ("Common Stock") of the Company as described
herein, subject to the terms and conditions of this Agreement; and
WHEREAS, Gillman desires to accept the grant of such option in
consideration for his providing certain accounting and financial services to the
Company, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the Company and Gillman hereby agree as follows:
<PAGE>
Section 1. Services of Gillman. Gillman shall provide such administrative,
--------- --------------------
financial and accounting services to the Company as may be required by the
Company from time to time, and particularly, to provide such services as may be
required of a chief financial officer of the Company.
Section 2. Grant of Option. Subject to the provisions of this Agreement,
--------- ----------------
in consideration for the services to be provided by Gillman on behalf of the
Company as described in Section 1, the Company hereby grants to Gillman an
option (the "Option") to purchase from the Company at any time and from time to
time, up to 25,000 shares of Common Stock (the "Option Shares") of the Company
at $.10 per share (the "Exercise Price"), subject to the terms of this
Agreement.
Section 3. Exercise of Option. The Option may be exercised in whole or in
--------- ------------------
part in accordance with the provisions of this Agreement by Gillman's tendering
the Exercise Price (or a proportionate part thereof if the Option is partially
exercised), in cash equal in value to the Exercise Price to the Company together
with a written notice specifying the number of the Option Shares Gillman wishes
to purchase pursuant to the terms of the Option. Optionee shall not, however,
purchase fewer than One Hundred (100) of the Option Shares at any one time
unless such lesser number of shares constitutes the remaining Option Shares
subject to the Option.
Section 3. Share Certificates. Upon receipt of payment in full of the
--------- -------------------
Exercise Price, and after taking such steps as it deems necessary to satisfy
2
<PAGE>
any withholding tax obligations imposed upon it by any level of government, the
Company will cause one or more stock certificates evidencing Gillman's ownership
of the Option Shares so purchased by Gillman to be issued to Gillman.
Section 4. Termination of Options. The options shall terminate on
--------- -----------------------
November 20, 1996, at 12:00 midnight.
Section 5. Restrictions. The Option and the Option Shares have not been
--------- -------------
registered under the Securities Act of 1933, as amended (the "Act"). The Company
may, in its sole discretion , register all or a portion of the Option Shares
underlying the Option but it shall have no obligation to do so. All shares
acquired upon the exercise of the Option shall be "restricted securities" as
that term is defined in Rule 144 promulgated under the Act. The certificate
representing the shares shall bear an appropriate legend restricting their
transfer. Such shares cannot be sold, transferred, assigned or otherwise
hypothecated without registration under the Act or unless a valid exemption from
registration is then available under applicable federal and state securities
laws and Gillman has furnished the Company with an opinion of counsel
satisfactory in form and substance to Company's counsel that such registration
is not required.
Section 6. Share Adjustments. If there is any change in the number of
--------- ------------------
shares of Common Stock on account of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges
of shares of Common Stock, or otherwise, the number of Option Shares available
3
<PAGE>
for purchase by the exercise of the Option, and the Exercise Price, shall be
proportionately adjusted by the Company.
Section 7. Miscellaneous Provisions.
--------- ------------------------
(a) Notices. Unless otherwise specifically provided herein, all notices to
-------
be given hereunder shall be in writing and sent to the parties by certified
mail, return receipt requested, which shall be addressed to each party's
respective address, as set forth in the first paragraph of this Agreement, or to
such other address as such party shall give to the other party hereto by a
notice given in accordance with this Section and, except as otherwise provided
in this Agreement, shall be effective when deposited in the United States mails
properly addressed and postage prepaid. If such notice is sent other than by the
United States mail, such notice shall be effective when actually received by the
party being noticed.
(b) Assignment. This Agreement and the rights granted hereunder may not be
----------
assigned in whole or in part by Optionee except by will or the laws of descent
and distribution, and the Option is exercisable during Optionee's lifetime only
by Optionee. This Agreement may be assigned by the Company without the consent
of Gillman.
(c) Further Assurances. Both parties hereto shall execute and deliver
------------------
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
4
<PAGE>
(d) Gender. Whenever the context may require, any pronouns used herein
------
shall include the corresponding masculine, feminine or neuter forms and the
singular form of nouns and pronouns shall include the plural and vice versa.
(e) Captions. The captions contained in this Agreement are inserted only
--------
as a matter of convenience and in no way define, limit, extend or prescribe the
scope of this Agreement or the intent of any of the provisions hereof.
(f) Completeness and Modification. This Agreement and the Option Plan
-------------------------------
constitute the entire understanding between the parties hereto superseding all
prior and contemporaneous agreements or understandings among the parties hereto
concerning the grant of stock options to Gillman. This Agreement shall not be
terminated, except in accordance with its terms, or amended in a writing
executed by all of the parties hereto.
(g) Waiver. The waiver of a breach of any term or condition of this
------
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
(h) Severability. The invalidity or unenforceability, in whole or in part,
------------
of any covenant, promise or undertaking, or any section, subsection, paragraph,
sentence, clause, phrase or word or of any provision of this Agreement shall not
affect the validity or enforceability of the remaining portions thereof.
5
<PAGE>
(i) Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, successors, estate and personal representatives of
Gillman and upon the successors and assigns of the Company.
(j) Cancellation of Existing Options. Optionee hereby acknowledges that
---------------------------------
upon receipt of this Option, 25,000 options representing the right to purchase
25,000 shares, exercisable at a price of $.10 per share, are in all respects
cancelled and of no further effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year set forth in the first paragraph of this Agreement above.
DCC COMPACT CLASSICS, INC.
a Colorado corporation.
By: /s/Marshall Blonstein
----------------------------
Marshall Blonstein, President
GILLMAN:
/s/Gary Gillman
----------------------------
Gary Gillman
6
Common Stock Purchase Warrant with Marshall Blonstein
COMMON STOCK PURCHASE WARRANT
200,000 Common Shares
DCC Compact Classics, Inc.
(a Colorado corporation)
Dated: April 15,1994
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND CANNOT BE SOLD, TRANSFERRED, DISPOSED
OF, PLEDGED OR HYPOTHECATED IN ANY MANNER WHATSOEVER UNLESS REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR, IF IN THE OPINION OF THE COMPANY COUNSEL
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS IS IN FACT APPLICABLE TO SAID
SECURITIES.
THIS CERTIFIES THAT MARSHALL BLONSTEIN (hereinafter called the "Holder")
is entitled to purchase from DCC Compact Classics, Inc., a Colorado corporation
(hereinafter called the "Company"), during a period hereinafter specified,
200,000 shares (the shares of Common Stock underlying the Warrants being
hereinafter referred to, in part or in whole, as the "Shares") of the Company's
common stock, par value $0.001 per share ("Com non Stock"), at an exercise price
of $0.25 per Share (the "Exercise Price"). The right to purchase the Shares
under this Warrant is exercisable, in part or in whole, by the Holder hereof
commencing on the date hereof and shall expire on April 15, 1999, and the Holder
shall have no further right to purchase any of such Shares, effective 5:00 p.m.
on April 15, 1999.
1. EXERCISE RIGHTS. The right to purchase the Shares under this Warrant
is exercisable in part or in whole commencing on the date hereof.
2. EXERCISE OF WARRANTS. The rights represented by this Warrant may be
exercised at any time within the period above specified, in whole or in part, by
(i) the surrender of this Warrant (with the purchase form at the end hereof
properly executed) at the principal executive office of the Company (or such
other office or agency of the Company as it may designate by notice in writing
to the Holder at the address of the Holder appearing on the books of the
Company); and (ii) payment to the Company of the Exercise Price then in effect
for the number of Shares specified in the above-mentioned purchase form. This
Warrant shall be deemed to have been exercised, in whole or in part to the
extent specified, immediately prior to the close of business on the date this
Warrant is surrendered any payment is made in accordance with the foregoing
provisions of this Warrant, and the person or persons in whose name or names the
certificates for Shares shall be issuable upon such exercise shall become the
<PAGE>
holder or holders of record of such Shares at that time and date. The
certificates for the Shares so purchased shall be delivered to the Holder within
a reasonable time after the rights represented by this Warrant shall have been
so exercised.
3. RESTRICTED SECURITIES. Unless the Shares shall have been registered
with the Securities and Exchange Commission, as hereinafter provided, all Shares
acquired upon the exercise of the Warrant shall be "restricted Securities" as
that term is defined in Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Act"). In such event, the certificate(s) representing the
Shares shall bear an appropriate legend restricting their transfer and such
Shares cannot be sold, transferred, assigned or otherwise hypothecated without
registration under the Act or unless a valid exemption from registration is then
available under applicable federal and state securities laws and the Company has
been furnished with an opinion of counsel satisfactorily in for and substance to
it that such registration is not required.
4. TRANSFER OF WARRANT. This Warrant may be sold, transferred, assigned,
or otherwise disposed of at any time by the Holder providing that the Company
shall be furnished with an opinion of counsel in form and substance
satisfactorily to it that such sale, transfer, assignment or other disposition
does not require registration under the Act and a valid exemption is available
under applicable federal and state securities laws. Upon any such disposition,
the right to accelerate the lapsing of the Company's right to repurchase through
obtaining the aforementioned financing's shall be effected by the Holder (i)
completing and executing the form of assignment, attached hereto, and (ii)
surrendering this Warrant with such duly completed and executed assignment form
for cancellation, accompanied by funds sufficient to pay any transfer tax, at
the principal executive office of the Company, accompanied by a written
representation from each such assignee addressed to the Company stating that
such assignee agrees to be bound by the terms of this Warrant; whereupon the
Company shall issue, in the name or names specified by the Holder (including the
Holder) a new Warrant or Warrants of like tenor with appropriate legends
restricting transfer under the Act and reciting the Company s right to
repurchase and representing in the aggregate rights to purchase the same number
of Shares as are purchasable hereunder.
5. REGISTRATION RIGHTS. Through April 15, 1999, the Holder shall have
piggyback registration rights for all Shares underlying this Warrant in
connection with any registration statement filed through such dates by the
Company to register securities of the Company for sale to the public (except a
registration statement filed in connection with an exchange offering or a
registration statement filed to register securities in connection with a Company
employee benefit plan). The Company shall give prompt written notice to Holder
2
<PAGE>
of any such proposed registration, and Holder shall inform the Company, within
20 days after receipt of such notice, if it wished to register any of its Shares
in the Company's registration statement. If Holder does not so inform the
Company, the Company shall have the right to assume that Holder does not wish to
register any of its Shares in the Company's registration statement. The Company
shall pay all costs and expenses of such registration, excluding fees and
expenses of counsel for Holder and underwriting discounts, commissions or
expenses of Holder with respect to the sale of its Shares. The Company shall
also register Holder's Shares in one (1) jurisdiction; provided, however, that
the Company shall not be required to qualify to do business in such jurisdiction
as a condition to the registration of the sale of the Shares in such
jurisdiction or commit to a general consent to service of process within the
jurisdiction. Subject to the right of Holder to sell its Shares under Rule 144
(as set forth below), Holder agrees to restrict the public sale of its Shares
under any such registration (which agreement shall not affect any other shares
of Common Stock or other securities of the Company which Holder may own) to the
extent requested by an underwriter of the Company's offering of securities;
provided, however, that Holder shall no be required to lock up its Shares for a
period exceeding six months from the effective date of the Company's
registration statement. Notwithstanding anything herein to the contrary, Holder
may sell shares of the Common Stock which it owns (including the shares as to
which it has registration rights) in the public marketplace pursuant to Rule 144
under the Act, to the extent that the provisions of the rule are satisfied. The
Company shall use its best efforts to make any such registration effective.
In the case of each registration pursuant to this Section 6, the Company
(i) will keep Holder advised in writing as to the initiation and progress of
proceedings for such registration and as to the completion thereof, and (ii) at
its expense, subject to the limitations as provided above, will keep such
registration effective for a period of at least nine months from the latter of
the initial effective date of the registration or the underwriter's restrictive
lock up period. Holder agrees to provide such information to the Company as is
reasonably requested by the Company which the Company believes is necessary in
order to allow the Company to register Holder's Shares.
6. STATUS OF SHARES. The Company covenants and agrees that all Shares
purchased hereunder will, upon issuance, be duly and validly issued, fully paid
and nonassessable and no personal liability will attach to the Holder thereof.
The Company further covenants and agrees that during the period within which
this Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock to provide for the
issuance of this Warrant.
7. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a stockholder of the Company, either at law or
3
<PAGE>
in equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
8. ADJUSTMENTS. The initial per share exercise price of $0.25 per share
and/or the number of Shares issuable upon exercise of each Warrant shall be
subject to adjustment from time to time as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock, or (iv) issue by reclassification of its shares of Common Stock of
the Company (including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving corporation), the
number of Shares purchasable upon exercise of each Warrant immediately prior
thereto shall be adjusted so that the holder of each Warrant shall be entitled
to receive the kind and number of Shares or other securities of the Company
which he would have owned or have been entitled to receive after the happening
of any of the events described above, had such Warrants been exercised
immediately prior to the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall issue rights, options or warrants to
all holders of its outstanding Common Stock, without any charge to such holders,
entitling them (for a period within 45 days after the record date mentioned
below) to subscribe for or purchase shares of Common Stock at a price per share
which is lower at the record date mentioned below than either the Per Share
Exercise Price in effect immediately prior thereto or the then current market
price per share of Common Stock (as defined in paragraph (i) below) the number
of Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Shares theretofore purchasable upon
exercise of each Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of issuance of such
rights, option or warrants plus the number of shares which the aggregated
offering price of the total number of shares of Common Stock so offered would
purchase at the higher of the Per Share Exercise Price in effect immediately
prior thereto or the current market price per share of Common Stock at such
4
<PAGE>
record date. Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately after the record
date for the determination or stockholders entitled to receive such rights,
options or warrants.
(c) In case the Company shall distribute to all holders of its
shares of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the continuing corporation)
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or earned surplus and
dividends or distributions or distributions referred to in paragraph (b) above
or in the paragraph immediately following this paragraph) or rights, options or
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred to in
paragraph (b) above), then in each case the number of Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
the number of Shares theretofore purchasable upon the exercise of each warrant
by a fraction, of which the numerator shall be the then current market price per
share of Common Stock on the date of such distribution, and of which the
denominator shall be the then currently market price per share of Common Stock
less the fair value (as determined by the Board of Directors of the Company,
whose determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights, options
or warrants, or such convertible or exchangeable securities applicable to one
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of stockholders entitled to
receive such distribution.
In the event the Company shall distribute to all holders of its
shares of Common Stock, stock of a subsidiary of securities convertible into or
exercisable for such stock, then in lieu of an adjustment in the number of
Shares purchasable upon the exercise of each Warrant, the holder of each
Warrant, upon the exercise thereof at any time after such distribution, shall be
entitled to receive from the Company, such subsidiary or both, as the Company
shall determine, the stock or other securities to which such holder would have
been entitled if such holder had exercised such Warrant immediately prior
thereto, all subject to further adjustment as provided in this paragraph (c);
provided, however, that no adjustment in respect of dividends or interest on
such stock or other securities shall be made during the term of a Warrant or
upon the exercise of a Warrant.
(d) In case the Company shall issue shares of its Common Stock, or
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock (excluding shares
5
<PAGE>
issued (i) in any of the transactions described in paragraphs (a), (b) and (c)
above, or (ii) to stockholders of any corporation is acquired by, merged into or
becomes part of the Company in an arm's length transaction) for a consideration
per share less than either the Per Share Exercise Price in effect immediately
prior thereto or the current market price per share on the date the Company
fixes the offering price of such additional shares, then in each case the number
of Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Shares theretofore purchasable by a
fraction, of which the numerator shall be the number of Shares of Common Stock
outstanding immediately after the issuance of such additional shares, and of
which the denominator shall be the total number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares plus the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in paragraph (g) below) for the issuance of such
additional shares would purchase at the higher of the Per Share Exercise Price
in effect immediately prior thereto or such current market price per share of
Common Stock. Such adjustment shall be made successively whenever such issuance
is made.
(e) In case the Company shall issue any securities convertible into
or exchangeable for its Common Stock (excluding securities issued in transaction
described above) for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such securities (determined as
provided in paragraph (g) below) less than either the Per Share Exercise Price
or the current market price per share, in either case, as in effect immediately
prior to the issuance of such securities, then in each case the number of Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Shares theretofore purchasable by a fraction, of which
the numerator shall be the number of Shares of Common Stock out standing
immediately prior to such issuance plus the maximum number of shares of Common
Stock of the Company deliverable upon conversion or exchange price or rate, and
of which the denominator shall be the number of shares of Common Stock which the
aggregate consideration received (determined as provided in paragraph (g) below)
for such securities would purchase at the higher on such Per Share Exercise
Price or such current market price per share of Common Stock. Such adjustment
shall be made successively whenever such issuance is made.
(f) In case the Company shall issue shares of its Common Stock under
a dividend reinvestment plan at a price per share less than the current market
price per share of the Common Stock, then in each case the number of Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Shares theretofore purchasable by a fraction, of which
the numerator shall be the number of Shares of Common Stock outstanding
6
<PAGE>
immediately after the issuance of such additional shares, and of which the
denominator shall be the total number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares plus the number of
shares of Common Stock which the aggregate consideration for the total number of
shares issued under the dividend reinvestment plan would purchase at such
current market price. Such adjustment shall be made successively whenever such
an issuance is made.
(g) For purposes of any computation respecting consideration
received pursuant to paragraphs (d), (e) and (f) above, the following shall
apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no cash shall any deduction be made for any commission, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of this issuance of shares of Common Stock for
a consideration in whole or in part other than cash (including, to the
extent permitted by applicable law, property and services rendered), the
consideration other than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of Directors of the
Company (irrespective of the accounting treatment thereof), whose
determination shall be conclusive; and
(iii) in the case of the issuance of securities convertible into
or exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion
or exchange thereof (the consideration in each case to be determined in
the same manner as provided in clauses (i) and (ii) of this paragraph
(g)).
(h) For the purpose of any computation under paragraphs (b), (c),
(d), (e) and (f)of this Section 8, the current market price per share of Common
Stock at any date shall be the average of the daily closing prices for 20
consecutive trading days commencing 30 trading days before the date of such
computation. The closing price for each day shall be the last such reported
sales price regular way or, in case no such reported sale takes place on such
day, the average of the closing bid and asked prices regular way for such day,
in each case on the principal national securities exchange on which the shares
of Com non Stock are listed or admitted to trading or, if not listed or admitted
to trading, the last sales price regular way for the Common Stock or closing
price published in the National Association of Securities Dealers Automated
7
<PAGE>
Quotation System ("NASDAQ"), or if such last sales price is not so published by
NASDAQ or if no such sale takes place on such day, the average of the closing
bid and asked prices of the Common Stock as reported by NASDAQ or any comparable
system, the average of the closing bid and asked prices as furnished by two
members of the National Association of Securities Dealers, Inc. selected from
time to time by the Company for that purpose.
(i) No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an increase or decrease
of at least on percent (1%) in the number of Shares purchasable upon the
exercise of each Warrant; provided, however, that any adjustments which by
reason of this paragraph (i) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
shall be made to the nearest one-thousandth of a share.
(j) Whenever the number of Shares purchasable upon the exercise of
each Warrant is adjusted, as herein provided, the Per Share Exercise Price
payable upon the exercise of each Warrant shall be adjusted by multiplying such
Per Share Exercise Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of Shares purchasable upon the exercise
of each Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Share purchasable immediately thereafter.
Notwithstanding the foregoing, the Per Share Exercise Price shall not be less
than the par value per Share.
(k) No adjustment in the number of shares purchasable upon the
exercise of each Warrant need be made under the paragraphs (b) and (c) if the
Company issues or distributes to each holder of Warrants the rights, options,
warrants or convertible or exchangeable securities, or evidences of indebtedness
or assets referred to in those paragraphs which each Holder of Warrants would
have been entitled to received had the Warrants been exercised prior to the
happening of such event or the record date with resect thereto. No adjustment
need be made for a change in the par value of the Shares, provided that the
Company shall not increase the par value per share of Common Stock so long as
this Certificate is outstanding.
(l) For the purpose of this Section 8, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the holders shall become
entitled to purchase any securities of the Company other than shares of common
stock, thereafter, the number of such other shares so purchasable upon exercise
8
<PAGE>
of each Warrant and the Warrant Price of such shares shall be subject to
adjustment from time to time in a manner and with respect to the Shares
contained in paragraphs (a) through (j), inclusive, above, and the provisions of
this Certificate with respect to the Shares shall apply on like terms to any
such other securities.
(m) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges, if any thereof shall not have been exercised,
the Warrant price and the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been originally adjusted (or had
the original adjustment not been require, as the case may be) as if (A) the only
shares of Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise rights, options, warrants or
conversion or exchange rights, and (B) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options, warrants or
conversion or exchange rights whether or not exercised; provided, further, that
no such readjustment shall have the effect of increasing the Warrant Price or
decreasing the number of share of Common Stock purchasable upon the exercise of
each Warrant by an amount in excess of the amount of the adjustment initially
made in resect to the issuance, sale or grant of such rights, options, warrants
or conversion or exchange rights.
(n) Whenever the number of Shares purchasable upon the exercise of
each Warrant or the Per Share Exercise Price of such Shares is adjusted, as
herein provided, the Company shall promptly mail by first class, postage
prepaid, to each holder notice of such adjustment or adjustments and a
certificate (a "Certificate of Adjustment") of the Chief Financial Officer of
the Company setting forth (i) the number of Shares purchasable upon the exercise
of each Warrant and the Per Share Exercise Price of such Shares after such
adjustment, (ii) a brief statement of the facts requiring such adjustment, and
(iii) the computation by which such adjustment was made. The Certificate of
Adjustment shall be conclusive evidence of the correctness of such adjustment
unless within thirty (30) days after receipt of such notice a holder requests
that a Certificate of Adjustment be rendered by a firm of independent public
accountants selected by the Board of Directors of the Company (who may be the
regular accountants employed by the Company), in which case the Company shall
cause such a Certificate of Adjustment to be surrendered and promptly mailed to
each holder. Any Certificate of Adjustment of such accountants shall be
conclusive evidence of the correctness of the adjustment as set forth therein.
(o) Except as provided in this Section 8, no adjustment in respect
of any dividends shall be made during the term of a Warrant or upon the exercise
of a Warrant.
9
<PAGE>
9. GOVERNING LAWS. This Warrant shall be governed by and in accordance
with the laws of the State of Florida and may not be amended other than by
written instrument executed by the parties hereto.
IN WITNESS WHEREOF, DCC Compact Classics, Inc. has caused this Warrant to
be signed by its duly authorized officer and this Warrant to be dated as of
April 15, 1994.
DCC COMPACT CLASSICS, INC.
By:/s/MILTON H. BARBAROSH, PRESIDENT
---------------------------------
Authorized Officer
Attest: ACCEPTED AND AGREED:
1-26-95 By:/s/MARSHALL BLONSTEIN
- ---------------------------- --------------------------------
Secretary Marshall Blonstein
10
Resolutions Modifying Exercise Price of Common Stock Purchase Warrants
MINUTES OF MEETING
OF THE BOARD OF DIRECTORS
OF
DCC COMPACT CLASSICS, INC.
May 24, 1995
A regular meeting of the Board of Directors of DCC Compact Classics, Inc. (the
"Company"), a Colorado Corporation, was held at 11:00 a.m. on May 24, 1995 in
the Company offices at 9301 Jordan Avenue, Suite 105, Chatsforth, California.
Those present were: Marshall Blonstein, Milton Barbarosh, Stan Layton, and Gary
Gillman constituting all the members of the Board of Directors.
Mr. Milton Barbarosh acted as Chairman of the meeting and Marcia McGovern, as
Secretary of the Company, was present to record the minutes.
The first topic for the meeting was the approval and ratification of the minutes
of the November 18, 1994 Annual Meeting of Stockholders. After discussion, upon
motion duly made and seconded, the following motion was unanimously approved:
RESOLVED, that the minutes of the meeting of the Board of Directors held on
November 18, 1994 are hereby approved and ratified.
As each member had previously examined the 1994 audited financials and tax
returns, the following motion was unanimously approved:
RESOLVED, that the Board approve the 1994 10-KSB, hereby attached as Exhibit
"A".
The next topic of discussion was the selection of new legal counsel for the
company. Upon motion clearly made and seconded, the following motion was
unanimously approved:
RESOLVED, that Atlas, Pearlman, Trop & Borkson be appointed as the Company's
legal counsel for any corporate matters and to review and update Forms 3 and 4
with the Security and Exchange Commission.
Also, upon motion clearly made and seconded, the following motion was
unanimously approved:
RESOLVED, that Winter, Scheifley & Associates be appointed as the Company
auditor.
<PAGE>
After discussion of various dates, it was moved and seconded unanimously to
approve the following:
RESOLVED, that the Annual Meeting of Stockholders be held on Monday, November
20, 1995 in the corporate offices of DCC Compact Classics, Inc. at 9:00 a.m.
PST.
The next topic of discussion was the subject of venture capital. Upon motion
duly made and seconded, the following motion was unanimously approved:
RESOLVED, to authorize Marshall Blonstein and Milton Barbarosh to raise three to
five million dollars for the Company. Additionally, it was resolved to authorize
Marshall Blonstein to pursue the acquisition of Yesterday's Radio & Video.
After discussion of Romance Alive Audio, ("Romance") a motion was made by Milton
Barbarosh to continue to further finance Romance up to an additional $50,000,
for up to an additional 10% equity; and that Gary Gillman will work to structure
an equitable transaction with the Company to be approved by the board.
With Marshall Blonstein abstaining, the motion was seconded, and approved.
A Compensation Committee was appointed, its members being Marshall Blonstein,
Gary Gillman, and Milton Barbarosh. An Audit Committee was appointed, its
members being Gary Gillman and Stan Layton.
After discussion, a motion was made and approved to issue to Marshall Blonstein
and Milton Barbarosh a stock option at 13(cent) for 200,000 shares each; and to
Stan Layton and Gary Gillman a stock option at 13(cent) for 50,000 shares each.
Further, it was approved that the prior stock options issued to Marshall
Blonstein and Milton Barbarosh will be repriced to 13(cent)/share.
This motion being unanimously approved, and there being no further business to
come before the meeting, upon motion duly made, seconded and unanimously
carried, the meeting was adjourned.
/s/Marshall Blonstein /s/Marcia McGovern
- ------------------------------ ---------------------------
Marshall Blonstein, Chairman Marcia McGovern, Secretary
2
Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
relating to the issuance of shares of securities
pursuant to the above Option Agreement
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 EAST LAS OLAS BOULEVARD, SUITE 1900
FORT LAUDERDALE, FLORIDA 33301
Direct Line: (954) 766-7858
July 10, 1996
DCC Compact Classics, Inc.
903 Jordan Avenue
Chatsworth, California
Re: Registration Statement on Form S-8, Consulting and Stock Option
Agreement with Gary Gillman, and Common Stock Purchase Warrant
with Marshall Blonstein.
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by DCC
Compact Classics, Inc. (the "Company") of up to 210,000 shares of Common Stock,
par value $.005 per share (the "Common Stock") to be issued pursuant to (i) a
Stock Consulting and Stock Option Agreement with Gary Gillman (the "Option
Agreement"), and (ii) a Common Stock Purchase Warrant, as modified, with
Marshall Blonstein (the "Blonstein Warrant").
In our capacity as counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Option
Agreement, the Blonstein Warrant, the Company's Articles of Incorporation,
By-Laws and corporate resolutions provided to us by the Company. In all such
examinations, we have assumed the genuineness of all signatures on original
documents, and the conformity to originals or certified documents of all copies
submitted to us as conformed, photostat or other copies. In passing upon certain
corporate records and documents of the Company, we have necessarily assumed the
correctness and completeness of the statements made or included therein by the
Company and we express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the opinion that
the Common Stock, when issued in accordance with the terms of the Option
Agreement and the Blonstein Warrant, will be validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion in the Registration
Statement on Form S-8 to be filed with the Commission.
Very truly yours,
/s/Atlas, Pearlman, Trop & Borkson, P.A.
-----------------------------------------
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
GEC/jz
4194.01
Consent of independent certified public accountants (Henson & Company)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
The Board of Directors
DCC Compact Classics, Inc.
We consent to the incorporation by reference, included herein, of our report
dated March 31, 1995, and to the reference to our firm as experts under the
heading "Experts".
HENSON & COMPANY By:/s/Elizabeth Henson
PASADENA, CA ------------------------
July 2, 1996 Elizabeth R. Henson, CPA
EXHIBIT (23.2.2)
Consent of independent certified public accountants (Winter,
Scheifley & Associates, P.C.).
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of DCC Compact Classics, Inc. of our report dated February
22, 1996, relating to the financial statements of DCC Compact Classics, Inc. as
of December 31, 1995.
/s/Winter, Scheifley & Associates, P.C.
---------------------------------------
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
July 8, 1996
Englewood, Colorado
